In our chaotic world of unpredictable possibilities, life insurance provides a blanket of stability. It is a safety net of security that lets us live in the moment without worrying about the future of those who depend on us. It is a quantifiable source of palpable comfort that promises to take care of our loved ones should the worst befall us. In our quest to provide for our family, we often purchase more comprehensive plans when we are younger for a variety of reasons. Yet, as our needs change our plans remain the same, demanding higher premiums for coverage we no longer need. The fact is things change, and our needs 20 years ago will likely not reflect our needs today.
Twenty years ago, perhaps you had children who depended on you. Now, those children are self-sufficient adults. They are self-reliant and independent. However, your insurance plan still inaccurately reflects them as dependents, thus increasing your premiums and decreasing your bank account. While this is just one example, there are many. Maybe you had more children and need additional coverage. Regardless, below I have articulated a few tips for when you decide you need to adjust your coverage.
Purchase an Additional Plan
While the above example concerns a lack of children, it is just as plausible you may have had more children, that you need more coverage for a greater death benefit in the event of your passing. Buying a second plan and adding it to your current insurance agreement is one way of doing such. For instance, if you need to put an additional child through college, you may want to consider an extra term life insurance plan that only covers up until your child’s graduation. That way, your child, once financially vulnerable to your possible passing while in school, would now be able to face such a tragic circumstance with at least the proper tools by his/her side.
Switching Your Beneficiary
In the event of a divorce or remarriage, this is often commonly neglected. Ensure the recipient of all your earthly possessions is a responsible individual who will treat your valuables with the appropriate respect. Also, if you are considering naming a minor as your beneficiary, you may want to think twice. Should your recipient be under the age of eighteen, the court will delay doling out your benefit until a guardian is named, which is likely to induce unwanted court costs and attorney fees.
Upgrading Term Life to Permanent Life
While term life insurance generally makes sense for younger professionals, it is less appealing to an older crowd. With term life insurance, you cannot cash out the plan. So while you are paying less in payments and still receiving coverage, you are effectively paying into nothing. Permanent life insurance plans on the other hand increase in cash value over the time, and allow you to cash out on a policy. In this regard, you should refer to your specific plan’s guidelines to see if an upgrade is fiscally rational. In any case, be wary of a conversion deadline. Sometimes the deadline to convert a policy is earlier than the plan’s expiration date.
Selling Your Policy
If you decide you no longer need life insurance because of a lack of dependents or for any other reason, you may want to consider selling your policy. It is not uncommon for a third party to be named your beneficiary and to pick up the premiums until your passing. This way, you no longer have to make payments and the third party can cash out on receiving the death benefit. Regardless, make sure to meticulously review any such transaction with a finance professional in order to guarantee you are receiving a good deal.
The above courses of action are merely a few of the myriad of options available in upgrading or downgrading your life insurance policy. I hope I could shed some light on the necessity of refining your insurance coverage as you grow older. Should you have any questions, please never hesitate to reach out to me through the contact page.